When someone next asks you to define “corporate transparency,” show them this:
Why? Three reasons. First, CRO’s 10th annual 100 Best List (compiled by IW Financial and edited by CRO) is completely based on publicly available information. That means the list’s sources are public places accessible to anyone researching Russell 1000® companies—non-secure websites, government and regulatory sources, investment publications and NGO databases.
Second, the methodology used to compile this year’s 100 Best list was debated and voted on in open session by 27 leading corporate responsibility practitioners representing nine major industry segments October 2008 at the CRO Conference in Chicago.
And lastly, for the first time ever, each listed company was asked to review the underlying data in advance of this publication to make sure no publicly available citation was overlooked. Of the 1,011 data edit requests we got back from the listees, 28.3 percent were validated and resulted in data changes. The result? Our most transparent 100 Best list.
This list also proves that 10 years is a long time on the corporate responsibility timeline. Only three companies have made the list all 10 years: Intel, Cisco and Starbucks. Nearly 400 companies have appeared on the list over the past 10 years, including 48, by our count, that no longer exist. Also, this year’s No. 1, Bristol-Myers Squibb—along with No. 5 HP—represents this year’s greatest comeback story. While both have been long-time strong performers on the responsibility front, they sat in the Penalty Box last year.
Over 10 years, the 100 Best List has gained a pretty high media profile. When last year’s CRO 100 Best Corporate Citizens List appeared on Feb. 21, we noted that 158,450 people visited TheCRO.com to take a peek. In the days that followed, CNBC, CNN, Bloomberg.com, WSJ.com, MSN.com and over four dozen dailies and countless bloggers covered the list and its companies. What’s more, 76 companies that fell short contacted CRO to ask what they needed to do to make the list next year. And that’s the purpose of this ranking, as corporate responsibility is an endless race for stakeholder loyalty. The 100 Best List is the best-known annual snapshot of the leaders.
The 2009 CRO 100 Best Corporate Citizens List® is the world’s best-known apples-to-apples comparison of Russell 1000® companies’ performance in environment, climate change, human rights, employee relations, philanthropy, financial and governance. Okay, that’s the headline. But within the numbers, you’ll find six much more compelling stories.
ROI on Corporate Responsibility: Out-Returning Competitors by 26 Percent
Explaining outsized financial performance by 100 Best Corporate Citizens List® companies is a chicken-and-egg question. Do 100 Best companies have higher profits and stock prices and thus more money to invest in corporate responsibility, or do their corporate responsibility practices themselves deliver the value?
No one example can illustrate the answer, but one example can be enlightening. Take Merck, which sat in the Penalty Box in 2008 and came back strong in 2009 to earn a No. 4 ranking. When controversy surrounding marketing of Vioxx broke in mid-2006, the stock slid to $27 from its 2005 high of $48. On March 13, 2009, MRK closed at $27.07, remarkable given that the Dow Jones Industrial Average (DJIA) is down 36 percent over the period since the Vioxx news broke. If MRK had tracked with the DJIA, the 3/13/09 per-share price would be nearly $10 lower—$17.30 to be exact.
In conversations with dozens of corporate responsibility leaders and Russell 1000® CEOs, CRO has found common understand that strong CR practices—especially those that are well-communicated—provide meaningful protection from downside stock risk. As Merck Chairman Richard Clark told Forbes.com March 6 in comments about the 2009 list, “We’ve really stepped back and made sure that we are more transparent about our business. I think we have always done good things, but I don’t know we have always communicated them internally or externally the best way we should. It’s even more important today because we are operating in a very difficult environment, and our reputation is being challenged. We need to go the extra mile now so our stakeholders can see what we do and regain their trust.”
Six Great Comeback Stories
For No. 1 Bristol-Myers Squibb, the numbers failed to pick up the 2006 regulatory enforcement issues stemming from former Chief Executive Peter Dolan’s negotiation foul-ups with the generic drug firm Apotex over the blood thinner Plavix. Bristol-Myers General Counsel Sandra Leung told Forbes.com, “This is a very different company today from what it was five years ago. We have gone through some difficult times, but we have learned from the errors of the past. We have emerged a stronger company, not only financially but culturally.”
HP has re-emerged at No. 5 after its 2006 boardroom bugging incident. The Bristol-Myers example describes a phenomenon known best to reformed smokers and problem drinkers—the motivating power of a fall from grace. Rocky-like, all six companies dedicated themselves to overcoming their challenges by focusing on transparency above all. No. 7 Mattel came back from 2006 and 2007’s supply-chain monitoring challenges. The largest toymaker’s sustainability leader Kathleen Shaver put it best, “Making this list is the result of lots of hard work, which never stops. While there is no one secret to success here, I’d say focusing on transparency is the single most important factor [in coming back].”
Energy has also made a significant return to grace, with No. 11 Exxon Mobil and No. 29 Chevron back in on the list. Exxon came back from spill-related violations in New York state, and Chevron from infractions related to Iraq’s Oil for Food Program.
The Three in 2009’s Penalty Box
The Cleansing Power of Sunlight
This year’s 100 Best List methodology, which is described in detail later in this story, is the result of 343 separate data points, all culled painstakingly from publicly available information sources. Each one of the data points represents the work of any of a number of people and systems within each company. All companies are responding to competitive pressure to improve the quantity and quality of their public disclosures.
This year’s 100 Best List environment criteria alone includes 165 data points, any one of which can take an intense amount of work for a company to track, calculate and disclose. In environment, for example, let’s look at one data point: disclosure of total NOX, or Nitrogen Oxide emissions. With No. 49 Dow Chemical, it takes inputs from over 2,000 sources to track that one piece of information. Yet tracking NOX and several other “Kyoto class” GHGs is now part of Dow’s company commitment to reduce GHG intensity 2.5 percent per year from 2005 to 2015. To fulfill its GHG promise to stakeholders the company started publishing its “2015 Sustainability Goals Update” quarterly starting Q1 2008. “It’s 1.823"true that you get what you measure,” says Dow’s CRO Bo Miller. “And while getting some of this tracking data is just plain hard work, you don’t get any credit unless you share it (publicly with stakeholders).”
President Obama’s Era of Responsibility
At the CRO press conference on March 6, IBM VP of Corporate Citizenship & Corporate Affairs Stanley Litow globalized Obama’s revolutionary mood-change. “So far, governments around the world have issued 3.4 trillion dollars in government economic stimulus,” he said. “And each government’s program involves some sort of check-off for good corporate responsibility and citizenship. The message is clear that good corporate citizenship matters, and not only is it good for business, it is critical for survival.”
Agree or disagree with the companies that made our list, or have any other thoughts to share? Leave us a comment below. We welcome your feedback.
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Posted March 5, 2009 in 100 Best